PE 6-4B Freight terms

Determine the amount to be paid in full settlement of each of two invoices, (a) and (b), assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.



Merchandise
Freight
Paid by Seller Freight Terms
Returns and
Allowances
a. $36,000 $800 FOB destination, 1/10, n/30 $4,000
b. 44,900 375 FOB shipping point, 2/10, n/30 2,40

Answer:
a.
$31,680. Purchase of $36,000 less return of $4,000 less the discount of $320 [($36,000 – $4,000) × 1%].

b.
$42,025. Purchase of $44,900 less return of $2,400 less the discount of $850 [($44,900 – $2,400) × 2%] plus $375 of shipping.